By: Alan Garfinkel, Esq.

Despite the Insurance Industry making over $100 Billion Dollars (that is One Hundred Thousand Million) in profits following the catastrophic hurricanes of 2004 and 2005, a number of insurance companies went bankrupt. In Florida, when an insurance company goes bankrupt, pending claims are handled and paid for by the Florida Insurance Guaranty Association ("FIGA"). When FIGA takes over the handling of an insurance claim, it is vital that a common interest ownership community act quickly and in strict compliance with all relevant statutes in order to preserve the association's rights under its insurance policy. Failure to understand the time frames and legal requirements may result in losing all rights to collect money due to the association. It is recommended that, at a minimum, a board of directors consult a lawyer on these often complex legal requirements.

FIGA was created in 1970 by the Florida Legislature and is operated as a non-profit corporation. Funding for FIGA comes from assessments against insurance carriers. Currently, FIGA is handling thirty-one (31) bankrupt insurance carriers, and at least 3,616 open claims. FIGA has reserves of over $179 Million Dollars.

Pursuant to Florida Statute 631.57, FIGA is required to handle insurance claims which arose during the term of the bankrupt carrier's coverage of the property. The Legislature, however, has placed certain limits on the extent of FIGA's responsibilities.

For example, the Florida Legislature enacted time limitations for bringing claims and lawsuits against FIGA. If specific action is not taken within the time limitations, an association's insurance claims are barred and the community loses the ability to collect money or obtain reimbursements for special assessments that were made.

When an insurance carrier enters bankruptcy, the Court enters an "Order of Liquidation" which dictates, among other things, when claims must be filed. Generally, the Order will indicate that all claims must be filed with FIGA within one year from the date of the Order. An association may not simply file a claim with the original carrier, the claim must be "re-filed" with FIGA in order to be in compliance.

"A covered claim…to which settlement is not effected and suit is not instituted against the insured of an insolvent insurer or the association within one year after the deadline for filing claims or any extension thereof, with the receiver of the insolvent insurer shall thenceforth be barred as a claim against the association and the insured."

Normally, a lawsuit against an insurance carrier for undervaluing a claim is brought as a breach of contract action. In Florida, most breach of contract actions can be brought anytime within five years of the loss. However, all lawsuits against FIGA must be brought within one year of the deadline for filing claims. In other words, if your insurance company entered receivership on June 1, 2006, you had to have filed a claim with FIGA by June 1, 2007. Now here is the kicker, an association must file a lawsuit against FIGA by June 1, 2008 or the community will lose any and all rights to even negotiate with FIGA to pay any more money.

All lawsuits against FIGA must be brought within one year of the deadline for filing claims. Therefore, if you are uncertain or have any doubt regarding the time before which your claim must have been filed, or about the date that the one-year statute barring a lawsuit will expire, it is recommended that you consult a lawyer or firm specializing in these insurance claims.

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